Health Horizons v. STATE FARM MUT. AUTO.

• Decision Date: 29 July 1999
• Docket Number: No. A99A0882, No. A99A0991.
• Citation: 239 Ga. App. 440,521 S.E.2d 383
• Parties: HEALTH HORIZONS, INC. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY. State Farm Mutual Automobile Insurance Company v. Health Horizons, Inc.
• Court: Georgia Court of Appeals

521 S.E.2d 383

239 Ga. App. 440

HEALTH HORIZONS, INC. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

State Farm Mutual Automobile Insurance Company v. Health Horizons, Inc.

Nos. A99A0882, A99A0991.

Court of Appeals of Georgia.

July 29, 1999.

Certiorari Denied January 14, 2000.

Gregory, Christy & Maniklal, Hardy Gregory, Jr., Cordele, Mundy & Gammage, John S. Husser, Cedartown, for appellant.

Powell, Goldstein, Frazer & Murphy, Elmer A. Simpson, Jr., George P. Watson, Linda G. Birchall, Richard W. White, Atlanta, for appellee.

ELDRIDGE, Judge.

On August 8, 1997, Health Horizons, Inc. ("Health Horizons") filed a complaint for fraud against State Farm Mutual Automobile Insurance Company ("State Farm") in the DeKalb Superior Court. In paragraph 3, Health Horizons mistakenly alleged that it "is a Georgia corporation." In its answer and defensive pleadings, State Farm did not raise any issue of the standing of Health Horizons to sue in Georgia, although it was a foreign corporation that transacted business in Georgia without a certificate of authority. After discovery and various discovery motions, it was revealed that Health Horizons did not have a certificate of authority; promptly, on May 26, 1998, a certificate of authority was obtained, and on June 10, 1998, the complaint was amended to reflect that Health Horizons was a foreign corporation transacting business in Georgia under a certificate of authority. On June 15, 1998, State Farm amended its answer to raise for the first time that Health Horizons lacked the capacity to sue because it was a foreign corporation transacting business in Georgia since January 1, 1995, had first obtained a certificate of authority on May 26, 1998, but had filed this suit on August 8, 1997. Subsequently, on July 20, 1998, State Farm filed its motion to dismiss for failure to have a certificate of authority at the time of filing the complaint. Health Horizons is engaged in the practice of corporate medicine which State Farm contends is the unauthorized practice of corporate medicine. Health Horizons is a foreign for-profit business corporation that "furnishes health care services" for which it seeks to collect from State Farm. Health Horizons contends that it is not engaged in the practice of medicine but receives payment of fees arising from the practice of medicine by Ken G. Knott, M.D. State Farm contends that OCGA §§ 43-34-26(a) and 43-34-43 and the rules of the Composite State Board of Medical Examiners prohibit the practice of medicine by a for-profit business corporation. On July 20, 1998, State Farm's motion on such grounds was denied.

Hearing on the motion was held on November 2, 1998, and the trial court granted the motion and dismissed without prejudice. Health Horizons filed its notice of appeal. On December 3, 1998, State Farm filed its notice of cross-appeal.

Case No. A99A0882

The sole enumeration of error is that the trial court erred in granting the motion to dismiss for failure to have a certificate of authority at the time the complaint was filed. We agree.

OCGA § 14-2-1502(a) provides: "[a] foreign corporation transacting business in this state without a certificate of authority may not maintain a proceeding in any court in this state until it obtains a certificate of authority."

OCGA § 14-2-1501(a) provides: "[a] foreign corporation may not transact business in this state until it obtains a certificate of authority from the Secretary of State." "[T]he purpose of [OCGA § 14-2-1501(a) ] is to require registration of foreign corporations which intend to conduct business in Georgia on a continuous basis, not as a temporary matter." Reisman v. Martori, Meyer, Hendricks &c., 155 Ga.App. 551, 552(1), 271 S.E.2d 685 (1980). A foreign corporation that obtains a certificate of authority is subject to service under OCGA § 14-2-1510. See Spiegel, Inc. v. Odum, 153 Ga.App. 380, 381-382, 265 S.E.2d 297 (1980). Registration of a foreign corporation makes it easier for the State Revenue Commissioner to collect taxes from it. OCGA §§ 48-5-511; 48-5-513; 48-7-21(a); 48-13-75; Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959); Roberts v. Lipson, 231 Ga. 142, 200 S.E.2d 722 (1973); Owens-Illinois Glass Co. v. Oxford, 216 Ga. 316, 322-324, 116 S.E.2d 293 (1960); Montag Bros., Inc. v. State Revenue Comm., 50 Ga.App. 660, 663-665(1), 179 S.E. 563 (1935), aff'd, 182 Ga. 568, 186 S.E. 558 (1936). These are the underlying reasons for such statutory scheme.

Under a similar statutory scheme, the Georgia Nonresident Contractors Act ("NCA"), the nonresident contractor must register with the State Revenue Commissioner and post a bond for tax liabilities incurred for income earned in the state from the contract and any other taxes due. See OCGA § 48-13-31. A certificate of authority from the Secretary of State does not exempt a nonresident contractor from registration with the State Revenue Commissioner. See George C. Carroll Constr. Co. v. Langford Constr. Co., 182 Ga.App. 258, 259-261, 355 S.E.2d 756 (1987), rev'd on other grounds, Clover Cable of Ohio v. Heywood, 260 Ga. 341, 344(3), 392 S.E.2d 855 (1990). OCGA § 48-13-37, like OCGA § 14-2-1502(a), provides that: "[n]o contractor who fails to register with the commissioner as required by this article or who fails to comply with any provision of this article shall be entitled to maintain an action to recover payment for performance on the contract in the courts of this state." "The purpose of the NCA is revenue collection enhancement or, in other words, protection of the State and its political subdivisions from nonresident contractors who leave the State without paying their taxes and unemployment contributions. [Cit.]" Dept. of Transp. v. Moseman Constr. Co., 260 Ga. 369, 393 S.E.2d 258 (1990). "The statutory scheme contemplates the possibility of cure by allowing late registration and bonding. Additionally, OCGA § 1-3-1(c) provides that substantial compliance with any statutory requirement shall be deemed and held sufficient." (Punctuation omitted.) Id. at 370, 393 S.E.2d 258. In Dept. of Transp. v. Moseman Constr. Co., the contractor transacted business in Georgia without first registering and posting bond with the Revenue Commissioner; when the contractor sued DOT, DOT moved to dismiss under OCGA § 48-13-31. The contractor's performance bond provided for payment of all taxes and the contractor ultimately complied with the NCA prior to the contract completion. The Supreme Court affirmed the trial court's denial of the motion to dismiss, holding:

[t]he purpose of the NCA is fulfilled where the nonresident contractor has registered its contract with the Revenue Commissioner and has posted the necessary bond to cover its possible liability to the State.... Because Moseman has now met the requirements of the NCA and has its liability to the State covered by the necessary bond, we hold that Moseman has substantially complied with the NCA, and, thus, the trial court did not err in denying the DOT's motion to dismiss.

Id. at 370-371, 393 S.E.2d 258.

Thus, under OCGA § 1-3-1(c), and construing OCGA §§ 14-2-1502 and 48-13-37 in pari materia as a similar body of law intended by the General Assembly by statutes to cure similar problems by coercing foreign corporations to register so that they would be subject to service and to revenue collection, late registration to obtain a certificate of authority fully satisfies the statutory scheme and will not bar suit by a foreign corporation, because there has been substantial compliance with the statutory scheme. OCGA § 1-3-1(a); McPherson v. City of Dawson, 221 Ga. 861, 862, 148 S.E.2d 298 (1966); Ryan v. Commrs. of Chatham County, 203 Ga. 730, 731-732, 48 S.E.2d 86 (1948); Wigley v. Hambrick, 193 Ga.App. 903, 905(4), 389 S.E.2d 763 (1989); Allison v. Domain, 158 Ga.App. 542, 544, 281 S.E.2d 299 (1981); Royal Indem. Co. v. Agnew, 66 Ga.App. 377, 378, 18 S.E.2d 57 (1941). Where a statute directs that a thing be done in a certain time without negative words prohibiting the subsequent performance, generally, the provision of time is directory only; where no injury results from such delay, subsequent performance is deemed substantial compliance with the statutory requirements. O'Neal v. Spencer, 203 Ga. 588(2), 47 S.E.2d 646 (1948); State of Ga. v. Battise, 177 Ga. App. 583, 584, 340 S.E.2d 240 (1986). Further, in Ga. L.1988, pp. 1070, 1225-1226, § 1, the General Assembly changed the language of former OCGA § 14-2-1421(b) of the 1969 Georgia Corporate Code that provided "unless before commencement of the action a certificate of authority shall have been obtained by such corporation," no action can be brought at all. Ga. L.1969, pp. 152, 197, § 76; A.B.R. Metals &c. v. Roach-Russell, Inc., 135 Ga.App. 193, 217 S.E.2d 447 (1975), rev'd on other grounds, Nat. Heritage Corp. v. Mount Olive Mem. Gardens, 244 Ga. 240, 242, 260 S.E.2d 1 (1979).

The 1968 Georgia Business Corporation Code had provided prior to the 1969 amendment that: "[n]o foreign corporation ... shall be permitted to maintain any action, suit or proceeding in any court of this State unless either before or after commencement of the action it shall have obtained such a certificate." (Emphasis supplied.) Ga. L.1968, pp. 565, 790. "This section is based upon Model Act Section 117, with minor changes. It covers approximately the same ground once covered by Ga.Code Ann., former [Ga.Code Ann.] § 22-1506, but differs from the latter in two important respects: (1) Under subsection (b) of the new section, no foreign corporation transacting business in this State without a certificate of authority is entitled to maintain suit in the Georgia courts on any cause of action arising out of its business in Georgia. Once it obtains a certificate, however, a suit previously filed by it may be continued without refiling." Comment, 22 Code of Ga. Ann., p. 190, §...